New Business

Sony's Google Gambit

October 08, 2009

Tokyo - It's starting to look like more than a schoolyard crush. As Sony (SNE) scrambles to recover from billions of dollars in losses, a flirtation with Google (GOOG) is becoming serious. It's the first PC maker to sell machines pre-loaded with the search giant's Chrome Web browser; the Sony Reader will be able to download e-books in a format backed by Google; and Sony Ericsson cell phones will use Google's Android operating system.

Google may be less excited about the tieups than Sony is, but the advances aren't likely to go unrequited. Last winter, Sony invited Google executives to Tokyo for discussions on integrating Android and other Google offerings into Sony's gadgets, according to a person with knowledge of the meeting. "Sony believes Google's products and software can help differentiate it from competitors," says Tim Bajarin of tech consultancy Creative Strategies.

While Sony officials declined to comment, closer ties with Google clearly fit into the Japanese company's ambitions in software. For decades, Sony has excelled at making gadgets, but it has lagged in linking them to each other and to the company's music, movies, and TV shows. To speed that process, Chief Executive Howard Stringer four years ago put Apple (AAPL) veteran Tim Schaaff in charge of software. Last February, Stringer reshuffled top management, turning to younger executives who are, he said at the time, "network-centric and very open-minded." Cozying up to Google helps Stringer speed development of products that can tap into the Web.

The moves are part of a shift toward open-source software at Sony. The Web has been flooded with photos of a Sony Ericsson touchscreen phone running Android, an open-source operating system. Sony recently introduced a global-positioning device that synchronizes with Google Maps to pinpoint where photos are taken, and it's now offering a video camera that lets users quickly upload clips to YouTube. The company says it also may let Google and others create applications for its PlayStation 3 game console. "Open technologies are very important to consumers," Schaaff said in an interview last year. "Obviously we don't have a monopoly on innovation."

It's too early to say whether the strategy will pay off for Sony. Android alone won't automatically make Sony's products easier to use or more compatible with each other. And there's a risk that Sony's offerings will start to look more like those from rivals. Samsung, HTC, and Motorola (MOT) already have smartphones running Android, and Hewlett-Packard (HPQ) and Asustek Computer are considering it for mini laptops. And there's little to stop others from offering the Chrome browser or compatibility with Google's book format on their devices. "Gaining competitive advantage from open-source software is difficult because it is available to competing manufacturers," says iSuppli analyst Matthew Wilkins.

Still, using Chrome may restore some cool to Sony's brand. Android gives Sony instant access to an online store where independent developers sell thousands of applications. That would allow the company to compete with similar services from Apple, BlackBerry (RIMM), Nokia, and Microsoft (MSFT). And in digital books, the Reader will have an edge on Amazon's (AMZN) Kindle, which can download content only from Amazon.com. "Sony knows it can't assign enough people to work on all these things," says Richard Doherty, research director at Envisioneering Group, a technology consultancy in Seaford, N.Y. "It can't do it alone."